Chapter 122:15-1 EDGE Bond Guarantee Program Requirements

(A)
"Bid bond" means a bond conditioned upon
the bidder on a contract entering into the contract, and furnishing the
required payment and performance bonds.

(B)
"Contract" means a written obligation of
the principal requiring the furnishing of services, supplies, labor, materials,
machinery, equipment, or construction. A contract does not include a permit,
subdivision contract, lease, land contract, evidence of debt, financial
guarantee, warranty of performance or efficiency, warranty of fidelity, or
release of lien (other than for claims under a guaranteed bond). Contracts may
include a maintenance agreement of two years or less which covers defective
workmanship or materials only. With the development
service agency's written
approval, it can also include a longer maintenance agreement covering defective
workmanship or materials, or a maintenance agreement covering something other
than defective workmanship or materials. To qualify for such approval, the
agreement must be ancillary to the contract for which the development service agency is guaranteeing a bond, must be
required to be performed by the same principal, and must be customarily
required in the relevant trade or industry.

(1)
In the case of a bid bond, the lesser of
the penal sum or the amount which is the difference between the bonded bid and
the next higher responsive bid. In either case, the loss is reduced by any
amounts the surety recovers by reason of the principal's defenses against the
obligee's demand for performance by the principal and any sums the surety
recovers from indemnitors and other salvage; or

(2)
In the case of a payment bond, the sum
necessary to pay all just and timely claims against the principal for the value
of labor, materials, equipment, and supplies furnished for use in the
performance of the bonded contract and other covered debts, or, at the surety's
option, the penal sum of the payment bond. In either case, the loss includes
interest (if any), but loss is reduced by any amounts recovered (through offset
or otherwise) by reason of the principal's claims against laborers,
subcontractors, suppliers, or other rightful claimants, and by any amounts
recovered from indemnitors and other salvage; or

(3)
In the case of a performance bond, the
sum necessary to meet the cost of fulfilling the terms of a bonded contract or,
at the surety's option, the penal sum of the bond. In either case, the loss
includes interest (if any), but loss is reduced by any amounts recovered
(through the offset or otherwise) by reason of the principal's defenses or
causes of action against the obligee, and by any amounts recovered from
indemnitors and other salvage; or

(4)
In addition, for each type of bond
described in paragraphs (F)(1) through (F)(3) of this rule, loss shall include
all reasonably and customary expenses incurred by the surety in adjusting
claims, in meeting bond obligations and in securing, or attempting to secure,
recoveries.

(1)
In the case of a bid bond, the person
requesting bids for the performance of a contract; or

(2)
In the case of a final bond, the person
who has contracted with a principal for the completion of the contract and to
whom the obligation of the surety runs in the event of a breach by the
principal.

(F)
"Payment bond" means a bond that is conditioned
upon the payment by the principal of money to persons who have a right of
action against such bond, including those who have furnished labor, materials,
equipment and supplies for use in the performance of the contract. A payment
bond cannot require the surety to pay an amount that exceeds the claimant's
actual loss or damage.

(G)
"Performance bond" means a bond conditioned upon
the completion by the principal of a contract in accordance with its terms.

(H)
"Premium" means the amount charged by a surety
to issue bonds. The premium does not include surcharges for extra
services.

(I)
"Principal" means
an EDGE business enterprise who in the case of a bid bond, is the business
bidding for the award of a contract. In the case of final bonds, principal
means the EDGE business enterprise liable to complete the contract, and the
business whose performance or payment is bonded by the surety.

(A)
The development service agency guarantees
sureties participating in the EDGE bond guarantee program against a portion of
their losses incurred and paid as a result of a principal's breach of the terms
of a bid bond or final bond on any eligible contract. The director of
the development service agency or his/her designee shall develop the
EDGE bond guarantee program application and procedures. The surety must obtain
the development service agency's approval through the application
process below before a guaranteed bond can be issued.

(B)
A surety who desires to participate in
the EDGE bond guarantee program shall submit an application to the division of
minority business affairs in the development services
agency . The director of
the development services agency or his/her designee shall review and
approve or disapprove the application. If the application is approved,
the surety must enter into a participation agreement with the
director in order to become a participating surety in the EDGE bond guarantee
program.

(C)
The participating
surety may then submit EDGE bond guarantee program requests for guarantee to
the development services agency . When submitting a bond guarantee program
request for guarantee to the development services
agency for a bond guarantee, the
principal must certify that it meets the eligibility requirements set forth in
section 123.152 of the Revised Code. The
director of development services agency or his/her designee shall review the
EDGE bond guarantee program request for guarantee and make a determination
whether to approve the request based on program fund availability and
principal's eligibility and said determination shall be final.

(D)
The total amount to be bonded (e.g. all bonds combined
under the contract: performance, payment and bid bonds) shall not exceed $1,000,000 in face value at the time of the bond or bond's execution
and must comply with the requirement set forth in
section 122.90(A) of
the Revised Code..

(E)
Bid
bonds and final bonds are eligible for a development
services agency bond guarantee if
they are executed in connection with an eligible contract and the director of
the development services agency or his/her designee has approved a
request for guarantee submitted as proscribed.

(A)
A principal is
ineligible for a development services agency bond guarantee under one or more of the
following circumstances;

(1)
An owner,
officer, director, or general partner of the principal is under indictment for,
or has been convicted of a felony involving protecting the integrity of
business transactions or business relationships; or a final civil judgment has
been entered stating that such owner, officer, director, or general partner has
committed a breach of trust or has violated a law or regulation protecting the
integrity of business transactions or business relationships; or

(2)
A regulatory authority has revoked,
canceled, or suspended a license of the principal, or an owner, officer,
director, or general partner of the principal, which is necessary to perform
the contract; or

(3)
The principal
has obtained a bond guaranteed by fraud or material misrepresentation .

(B)
A surety is ineligible for a
development services agency bond guarantee under one or more of the
following circumstances:

(1)
A regulatory
authority has revoked, canceled, or suspended a license of the surety, or an
owner, officer, director, or general partner of the surety, which is necessary
to transact business as a surety insurer; or

(2)
The surety has obtained a bond guarantee
by fraud or material misrepresentation; or

(3)
The surety has materially breached the EDGE bond guarantee
participation agreement with the development services
agency .

(C)
A principal may lose eligibility for
further development services agency bond guarantees if any of the following
occurs under a development services agency -guaranteed bond issued on behalf of the
principal:

(2)
The obligee has declared the principal to
be in default under the contract;.

(3)
The surety has requested reimbursement
for losses incurred under the bond; or.

(4)
The principal committed fraud or material
misrepresentation in obtaining the guaranteed bond.

(D)
A surety may lose eligibility for further
development services agency bond guarantees if any of the following
occurs under a development services agency -guaranteed bond issued on behalf of the
principal:

(1)
The surety committed fraud or
material misrepresentation in obtaining the guaranteed bond.

(A)
The surety
shall monitor the principal's progress on bonded contracts guaranteed by
the development services agency in a reasonable
manner determined by the surety, which may include job status reports from
obligees of final bonds guaranteed by the development services
agency The surety must
maintain documentation of its monitoring
and provide such documentation upon the request of the development services
agency. In the event obligees do not respond to a surety's requests for job
status reports, the surety may monitor progress of guaranteed bonded projects
through the contractor's job schedules..

(B)
A surety shall not charge a principal a
premium amount greater than that authorized by the Ohio department of
insurance. The surety shall not require the principal to purchase casualty or
other insurance or any other services from the surety or any affiliate or agent
of the surety. The surety shall not charge non-premium fees to a principal
unless the surety performs other services for the principal, Ohio law does not
prohibit the additional fee, and the principal agrees to the fee.

(C)
No person may be named co-obligee or
obligee or on a rider to the bond unless that person is bound by the contract
to the principal (or to the surety, if the surety has arranged completion of
the contract) to the same extent as the original obligee. In no event may the
addition of one or more co-obligees increase the aggregate liability of the
surety under the bond.

(D)
There
shall be no execution or approval of a bond by a surety after commencement of
work under a contract unless the surety obtains prior written approval from the
development services agency .

(A)
A surety shall submit claims for
reimbursement of losses on a bond guarantee on a form approved by
the development services agency according to the terms of the
EDGE bond guarantee agreement entered into between the surety and the
development services agency. Claims for reimbursement and any additional
information submitted are subject to review and audit by
the development services agency .

(B)
Unless otherwise notified by
the development services agency to the contrary, the surety must handle and
process all claims under the bond, all settlements and all recoveries in the
same manner and under the same standards as it uses for non-guaranteed bonds.
The surety shall be entitled to reimbursement for the guaranteed share of
losses, including financing of the bond principal to avoid an imminent default,
as long as it paid the losses in good faith and in accordance with its normal
procedures and reasonable industry standards. The surety shall pursue indemnity
and recovery on account of such losses in accordance with its normal procedures
and reasonable industry standards. The development
services agency shall reimburse
the surety for the guaranteed percentage of the cost of such indemnity and
recovery efforts, and the surety shall remit to the
development services agency the
guaranteed percentage of all indemnity or recovery received by the
surety.

(C)
The payment by
the development services agency of a surety's claim does not waive,
compromise, or invalidate any of the terms, claims and defenses under the EDGE
bond guarantee agreement, the Ohio Revised Code, Ohio Administrative Code or
any other applicable law, regulation or policy.

(D)
Within
thirty days of surety's receipt of notification from the development services agency that a claim or any portion of a claim
was improperly paid by the development services agency
to the surety , the surety shall repay the specified amounts to
the develoment services agency .